At its latest monetary policy meeting the Bank of Japan has kept interest rates unchanged.
Policymakers said the world’s third largest economy continues to show signs of moderate recovery, but noted a weakening of factory output and business sentiment in Japan.
Economists said that shows the central bank is aware of risks to growth which could require a response in the shape of more monetary easing.
Bank of Japan Governor Masaaki Shirakawa said it will carefully examine the impact of long-term interest rate moves on the country’s economy.
Shirakawa said the bank’s monetary easing steps in October have had some effect in pushing down longer-term interest rates in Japan.